Japan's Nikkei outperforms as opposition wins big

Article by: PAN PYLAS

Associated Press

December 17, 2012 - 4:37 AM

LONDON
- Japanese shares outperformed all others Monday amid hopes that the new government will soon enact fresh stimulus measures.

The country's Nikkei 225 index jumped 0.9 percent to close at 9,828.88, its highest level since April, after the country's Liberal Democratic Party swept back into power at weekend elections with a landslide victory.

Party chief Shinzo Abe, who is in line to become the country's prime minister, favors increased spending on public works and setting a 3 percent economic growth target. He's also expected to lobby for stronger action by the central bank to get Japan out of its deflationary trap.

"Japanese equities rallied today on the back of a resounding victory by Shinzo Abe's LDP, giving them a mandate to boost economic growth through more aggressive fiscal and monetary easing," said Rebecca O'Keeffe, head of investment at Interactive Investor.

Expectations of further stimulus in Japan, despite the country's sky-high debt levels and doubts over the effectiveness of looser economic policy, further weighed on the yen. The dollar was 0.4 percent higher at $83.79 yen.

Elsewhere, stocks were having a lackluster start to the week amid concerns over whether the White House and Congress will agree a U.S. budget deal in time to avoid the "fiscal cliff" of automatic tax increases and spending cuts at the start of next year. Without a deal, the U.S. economy, the world's largest, faces a difficult start to 2013 and many economists fear it could sink back into recession.

"This story is certainly showing no signs of disappearing from the financial headlines, but with the December 31 deadline now hurtling towards us, the risk is that going into the Christmas break many investors simply won't be wanting to stomach the exposure," said Fawad Razaqzada, market strategist at GFT Markets.

In Europe, the FTSE 100 index of leading British shares was down 0.4 percent at 5,897 while Germany's DAX fell 0.2 percent to 7,583. The CAC-40 in France was 0.6 percent lower at 3,620.

Wall Street was poised for a flat opening with both Dow futures and the broader S&P 500 futures more or less flat.

In recent weeks, the dollar had suffered due to these fears, at least against the euro. But on Monday, there was little going on with the euro flat at $1.3151.

Oil markets were subdued too, with the price of benchmark New York crude down 5 cents at $86.68 a barrel.

Elsewhere in Asia, China's shares fared fairly well as its new leaders promised more spending if needed to underpin a wobbly economic recovery. Those hopes helped the Shanghai Composite to rise 0.4 percent to 2,160.34 and the smaller Shenzhen Composite index to end 0.4 percent higher to 819.58.

On Sunday, China's new Communist Party leaders under party General Secretary Xi Jinping pledged a "proactive fiscal policy" and "prudent monetary policy" in a statement carried by the official Xinhua News Agency. They were references to the willingness to boost spending if needed and keep credit easy so long as inflation stays low.

Elsewhere in Asia, South Korea's Kospi lost 0.6 percent to 1,983.07 and Hong Kong's Hang Seng was down 0.4 percent at 22,513.61.